Barrister wanting to upgrade home

Paul, 55, is a barrister who earns $600,000 to $900,000 a year. The family home is worth $2.5 million, with $1.1 million owed on it. Paul and his wife, Anna, have about $900,000 in super and he puts household expenditure at about $300,000. They want to upgrade to a larger home, likely to cost about $3.5 million.

Paul wants to know how many more years he will have to work to finance the move. But it also transpires he is a nervous investor, having made two previous investments where almost all the capital was lost. And while he has a belief that “bricks and mortar is best", he doesn’t want to tie himself to many years with a very high home loan.

Solution When Paul and Anna discuss their finances, it’s also evident they have different beliefs around money. Paul believes you have to work hard for money, you have to be careful with it and the sharemarket is very risky. Anna feels money can easily be earned so will always be there, that money alone does not earn you respect and that it’s not the key driver in life.

What they shared was the need to provide their family with a good home and enough resources for everyone to reach their potential. But Paul’s stress was because he couldn’t bring himself to trust advice.

“He wanted desperately to upgrade to the new home but didn’t want to have to work for too many years," says adviser Justin Hooper. “He knew that he needed to maximise the return on his investments and he suspected that this would require an element of gearing which on the face of it seemed like a good idea anyway. But because he had previously lost money through investments, he was petrified to take risk and was very worried about how it all would work. So he was frozen in his financial management."

After doing the numbers, the couple faced a few choices around going ahead with the more expensive home. For Paul to retire as planned at 65, the family would have to cut expenses by 20 per cent after that; or he could retire at 67 and expenses would need to be cut by only 10 per cent; or Paul would have to carry on working until 70.

Having such clear-cut choices gives Paul a sense of relief as he knows what the choices will be. The couple decide to go ahead with the new home.